New era of consumer, climate-oriented utility oversight

Illinois Commerce Commission rejects irresponsible Peoples Gas ploy, lowers ComEd’s profits

For the second time in a month, utility regulators at the Illinois Commerce Commission on Thursday handed down decisions that portend the beginning of a new era of consumer- and climate-focused utility oversight in Illinois.

“We applaud Chairman Doug Scott and other members of the Illinois Commerce Commission for making a decisive pivot away from the more utility-friendly approach of the past,” said Illinois PIRG Director Abe Scarr.   

The five-person commission, recently overhauled by Gov. J.B. Pritzker, set new rates for the electric utilities ComEd and Ameren. Notably, the Commission rejected ComEd and Ameren’s grid plans, finding that the utilities failed to meet the standards set by law, and ordered them to re-submit compliant plans next year. The Commission rejected significant planned utility spending based on the lack of compliant grid plans. 

The commission set Comed’s authorized profit rate, known as the return on equity (ROE), at 8.9% over the next four years. ComEd initially proposed a 10.5% ROE in 2024, which would escalate over four years to 10.65% in 2027. Illinois PIRG submitted expert testimony recommending a 6.5% ROE, arguing that state policies virtually guarantee ComEd’s profits, so it does not need a high ROE for financial health. Miniscule differences in profit rates can translate into hundreds of millions of dollars on customer bills. 

“As it did with the gas rate cases, the Commission took important steps to rightsize ComEd and Ameren’s spending levels and limit their impact on customer bills. It also set a much lower profit rate than proposed by ComEd, saving customers hundreds of millions of dollars,” said Scarr. “We are pleased the Commission invited further consideration of profits rates under multi-year rate plans and will continue to make our case to the Commission that Illinois utilities can remain financially healthy with significantly lower profit rates.” 

The Commission also denied Peoples Gas’ motion to “clarify” and reverse portions of the Commission’s November decision regarding the failing Peoples Gas pipe replacement program and authorize an additional $134 million in 2024 spending, which would raise its already record-breaking rate hike by an additional $8.1 million. 

“We hope Peoples Gas now has the clarity it needs: while it maintains its fundamental service obligation to maintain public safety, it can no longer operate accountability-free and waste billions of dollars on a pipe replacement program that fails to achieve its public safety objective,” said Scarr. “We look forward to working with the commission and other parties to enact meaningful reforms to the program next year.”

Since the November decision, Peoples Gas and its allies had mounted a pressure campaign targeting the Commission. It included suggesting the legislature intervene, threatening the pending confirmation of three commissioners and sending more than 20 letters in support of the motion from unions, contractors, and others, each requiring an ethics report from the Commission in compliance with its “ex-parte” communications rules. Commissioner Scott directly addressed these ex-parte communications, asking members of the public to use more appropriate means of communicating with the Commission. 

Other parties in the case, including Commission staff, the Office of the Attorney General, City of Chicago, Citizens Utility board, AARP and the Public Interest Organizations, argued the commission’s order does not need further clarification and that the motion was procedurally flawed and should be denied.